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As an employer, ensuring you have enough resources in terms of people may not always mean employing staff through a standard employment contract. In fact, there may be occasions when your staff cannot complete the work you require. This may be due to time constraints, resources, or a lack of expertise in a specific area. In this case, you may decide to employ contractors outside your workforce. Therefore, it is important to understand your legal obligations when contracting. Indeed, if you make a mistake, you may find yourself required to pay unpaid tax, and owing employment rights you did not realise you owed.
This article will explain what legal rules you should understand when contracting. It primarily covers what to consider when contracting with self-employed contractors.
What is a Contractor?
A contractor is a person who works for you but who is not usually your employee. Instead, you are often engaging with another self-employed person. You will likely have a contract with them but not an employment contract. Therefore, some different rules will apply when you work with the contractor than those that apply to your employees.
A self-employed contractor, for example, will not usually require payment through the PAYE scheme, which you are required to pay your employee through. This means that the tax law which applies to them is different from your employees. Contractors will also not enjoy the rights your employees enjoy through employment law.
What Must I Consider When Using a Contractor?
When using a self-employed person as a contractor to carry out work for your business, employment law does not cover their rights and responsibilities. However, they do still have rights and responsibilities when carrying out the work with you.
1. Health and Safety Rights
Work activity is covered by health and safety law regardless of whether the person carrying out that work is an employee or a contractor. When you contract with a self-employed person to carry out work for your business, there are rights concerning health and safety which you must both be aware of.
As an employer, you must ensure that if a contractor is working on your worksite, you ensure they are healthy and safe as far as is reasonably practicable. This is the same as the legal requirement for your employees. If you are an employer with more than five employees, you must have an up-to-date health and safety policy in place. This will also apply to those you are contracting with who are working in your place of work.
You are also required to assess workplace risks that could affect employees, which applies to your contractor when they are at your workplace. However, a self-employed contractor working in your workplace is also responsible for assessing whether the work they are engaged in is a risk to others or not.
Depending on your area of business, there may be other specific health and safety laws that apply to you in the workplace that may be relevant to your employees and contractors.
2. Protection Against Discrimination
There are situations where the law will protect your contractor from workplace discrimination. This is where the contractor you are using is self-employed, and the contract you have with them requires them to carry out the work personally.
Therefore, if the person you are contracting with feels that you have discriminated against them, they could take their case to an employment tribunal.
The following could be grounds for claiming discrimination:
- sex;
- race
- age;
- religion;
- gender reassignment;
- sexual orientation;
- disability;
- marital status; or
- parental status.
3. Data Protection Rights
When contracting with a self-employed person or a business, your requirements under the GDPR protects their data. This will also cover data about their suppliers, clients and employees.
4. Whistleblowing Protection
Depending on the nature of your business, you could owe self-employed people you contract with protection in terms of whistleblowing. This is where a worker raises concern about wrongdoing in the workplace. An example of where this protection would apply for contractors is those working in the NHS, such as doctors, dentists, pharmacists and ophthalmologists.
5. Rights Set Out in the Contract
When contracting out work for your business, you will likely have a contract with the contractor. In addition to any legal obligations you may both have, you will also have to abide by any rules and rights set out in the contract. If you are in breach of these, the contractor may be able to make a claim in the civil courts against you.
Some of the types of considerations you may want to think about when contracting in terms of the contract are:
- payment amounts and dates;
- how you deal with complaints;
- who supplies the materials needed;
- termination notice period
- contractual audit rights; and
- hours of work.
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Contracting With Employment Intermediaries or ‘Workers’
There may be times when you contract out work but are not contracting directly with self-employed people. Instead, you may contract with an employment intermediary, more commonly known as an ‘agency’ or ‘employment business’. These businesses supply workers to you.
In these instances, the employment intermediary must follow ‘agency rules’. This means that the employment intermediary is responsible for checking that the workers’ correct tax and national insurance are paid. This is similar to how you as an employer have to operate a PAYE scheme when paying your employees.
Where a person you are contracting with is not through an employment intermediary, they may be a ‘worker’ rather than self-employed. Although the contractor is a worker, you can sometimes pay them through PAYE or cash in hand, so the rules about both of these situations will apply. Furthermore, parts of employment law protect workers, such as the rules about breaks, holiday pay, and National Minimum Wage.
Key Takeaways
When you decide to contract out work in your business, this can mean asking either a self-employed person to do the work or someone who is classed as a worker or even an employee. You must be clear about the contractor’s status so that you know what rules apply. This can include rules about health and safety, employment law, discrimination, and tax. Getting it right helps you to avoid potential problems, such as finding yourself in trouble over health and safety obligations.
If you need help with understanding the legal considerations for contracting in the UK, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A contractor is a person who carries out work for your business and is not usually an employee. They are often self-employed but could also be a ‘worker’.
Apart from the rules within the actual contract with the contractor, there are no rules specific only to contractors. Instead, certain rules will apply depending on the contractor’s status.
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